What’s Your Hypothesis?

Why my news startup went the for-profit route

CJR’s “Launch Pad” feature invites new media publishers to blog about their experiences on the news frontier. Past columns by Josh Kalven, founder of Newsbound, can be found here.

A year ago, I had a full-time job running a political news website in Chicago and an entrepreneurial venture bouncing around in my head. At the time, I referred to it as the “backstory project”: a digital media company geared towards users who want to understand a complex news narrative, but don’t know where to start.

The more I talked to friends, colleagues, and strangers about the concept, the more I heard about the alienation and confusion they often experience when interacting with the news. While my motivation grew with those conversations, I didn’t have much to show for it. I could talk about the idea, sure, but I had nothing on paper.

In February of last year, I learned (via this Craig Shapiro tweet) of the Knight Digital Media Center’s “News Entrepreneur Boot Camp” at the University of Southern California. Now in its third year, the bootcamp is billed as a seminar “for digital journalists and others who are passionate about new ideas but who lack the grounding in business and startup skills.”

The process of applying for the program forced me to get down to brass tacks and give form to my concept. (Note to aspiring entrepreneurs: Deadlines are crucial to moving the ball forward, particularly in the early going. You need to feel some time pressure and external expectation. Find a way to make that happen.)

Ultimately, KDMC accepted me into the program and in May I traveled to Los Angeles for the boot camp. In my application, I conceded that I didn’t know whether to launch as a for-profit or nonprofit venture. As I headed west a few months later, I felt myself leaning strongly towards the latter, mostly due to the fact that my concept came with a social mission and I had a decent network in the foundation world.

The intensive seminar took place in a classroom at USC’s business school and largely focused on improving our “sell” (we had to stand up and pitch our projects to the room on a daily basis) as well as understanding our “customer” (the person that would theoretically be on the other end of that pitch).

The “customer” question is a tough one in the news business. As the days stretched on, a frustrating reality swept over the room: According to most of our business models, the advertiser or foundation—rather than the user—represented the primary customer. This is a painful mental shift when you’ve worked for many years as a journalist.

In the wake of these discussions, I re-examined my own concept. I started this process by acknowledging that I have two products: one is editorial and the other is technological.

On the editorial side, I face the challenge of creating accessible, engaging, educational content that provides a point of entry for users trying to understand complex news narratives.

Meanwhile, I’m also laying the groundwork for a tech component that lets users manage and track their personal progress in consuming our editorial product. I want to enable them to revisit ongoing stories on their own schedule and, when they do so, pick up exactly where they left off (or backtrack if they need to remind themselves what came before).

The underlying acknowledgement is this: while the “news cycle” is fixed and furiously paced, the “consumption cycle” is unique to each individual user.

As a result, those who consume the news in irregular intervals often have a hard time connecting their existing knowledge base with the updates that confront them. This contributes to the confusion and alienation I referenced above. It’s the exact problem that I want to solve with Newsbound. Returning to the “customer” question, my hypothesis is that the right mix of explanatory editorial content and tools that allow users to personalize their interactions with that content will provide the basis for a strong subscription model.

In scientific research, an experimenter develops a hypothesis with a suspected set of ideas and then builds an experiment to support the hypothesis. I think this is a great way to think about building businesses as well. Find a niche that is just beginning to show promise, develop a hypothesis about where that niche will go in the future, and then build a business to test that hypothesis. Working toward a philosophy rather than a company’s success keeps you humble. You’re not devoting your soul to the business; because it’s an experiment, you’re devoting your life and your time to supporting your hypothesis, or your philosophy.

Sometimes experiments fail, forcing you to step back and reevaluate your hypothesis. Or change your business slightly. The most successful businesses start with theories for the future, especially in rapidly evolving fields like the technology industry, and they’re not afraid to rapidly iterate when they find the company isn’t working.

I left the KDMC bootcamp sill unsure whether to form Newsbound as a for-profit or nonprofit venture. Some of the best advice I got came from Jeff Klein, who told me not to view it as a fork in the road. He reminded me that I still had the ability to straddle two lanes, that I didn’t have to commit at that juncture.

I took that to heart. In the months following the boot camp, I continued to explore each possibility. Both potential investors and foundation funders seemed pleasantly surprised by my interest in generating revenue. Ultimately, the investors’ comfort with experimentation—as well as their understanding that my concept would likely change in unforeseen ways when tested by the market—pulled me in the for-profit direction.

If you’re mission-based and have a very clear idea of what you’re going to build, the infrastructure-intensive process of starting a nonprofit often makes sense. (My only concern is that the resulting infrastructure can sometimes keep a new entity from “iterating” in the early stages, when its clear that certain assumptions aren’t panning out.)

If you’re like me—you have a problem that you want to solve, have a revenue-based hypothesis to go along with it, but need space to test your product—the for-profit way may be a healthier fit.

Ultimately, I’m grateful to be on this path. The feeling that someone is investing in my ability to experiment and adjust, rather than just my business plan or my mission, makes this process a whole lot more fun.

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